Key Takeaways
- • Nippon Alternatives CEO Aashwin Duggal says regulators should raise investment limits for life and general insurers, currently 3% and 5% respectively, to deepen India's domestic capital base for Category II AIFs.
- • Duggal backs a calibrated framework for EPFO, which manages roughly Rs 30 lakh crore for nearly 30 crore members, to invest in Category II AIFs, starting with a small allocation.
- • SEBI data show total AIF commitments reached Rs 17.53 lakh crore as of June 2026, up nearly 24% year-on-year, with Category II funds accounting for Rs 13.03 lakh crore.
- • EPFO is considering allocating up to 3% of fresh annual accretions to Category I and II AIFs, with the proposal expected before its Central Board of Trustees in November.
- • Duggal argues insurers' long-duration liabilities align well with private credit, though Category II strategies are illiquid and require patient, multi-year capital.
Summary
India's Category II alternative investment funds need a wider pool of long-term domestic capital, and insurers and pension funds could play a larger role in providing it, according to Aashwin Duggal, newly appointed CEO of Nippon Alternatives, speaking to Moneycontrol. He said regulators should consider raising investment limits for life and general insurers, which currently stand at 3% and 5% respectively. He noted that insurers in some global markets allocate around 20% of AUM to alternatives.
The regulatory framework is already evolving. Earlier in 2026, the Insurance Regulatory and Development Authority of India widened insurers' investment options, including permitting investments in equity and debt of private limited companies and easing infrastructure financing norms through special purpose vehicles. Under the revised framework, life insurers can invest up to 3% of life or segregated funds, and general insurers up to 5% of investment assets, in private limited companies, AIFs and venture funds combined. Industry reports indicate insurers have nearly doubled their commitments to private credit funds over the past two years.
Duggal also backed a gradual, safeguards-led pathway for the Employees' Provident Fund Organisation. According to the article, EPFO is considering allocating up to 3% of fresh annual accretions to Category I and II AIFs, with the proposal expected before its Central Board of Trustees in November. EPFO has not yet invested in such funds, and any move would require final trustee approval and detailed guidelines. Reported safeguards include a minimum AIF corpus of Rs 100 crore, caps on exposure to individual funds, restrictions on overseas-incorporated entities, and fund-manager independence requirements. Initial investments may be routed through the National Investment and Infrastructure Fund and SIDBI's Startup India Fund of Funds 2.0.
India's AIF industry has expanded rapidly, but remains heavily reliant on wealthy individuals and family offices. SEBI data show total AIF commitments rose to Rs 17.53 lakh crore as of June 2026, up nearly 24% year-on-year, while cumulative investments crossed Rs 7 lakh crore for the first time. SEBI's annual report recorded 1,829 registered AIFs as of March 2026, of which 1,019 were Category II funds.
Duggal said private credit is attracting increasing interest from domestic institutional investors, including insurers and family offices, particularly in performing and high-yield credit strategies. He cautioned, however, that Category II investments are illiquid and require long-term, patient capital, and that governance, valuation, liquidity and concentration risks must be carefully managed.
The regulatory framework is already evolving. Earlier in 2026, the Insurance Regulatory and Development Authority of India widened insurers' investment options, including permitting investments in equity and debt of private limited companies and easing infrastructure financing norms through special purpose vehicles. Under the revised framework, life insurers can invest up to 3% of life or segregated funds, and general insurers up to 5% of investment assets, in private limited companies, AIFs and venture funds combined. Industry reports indicate insurers have nearly doubled their commitments to private credit funds over the past two years.
Duggal also backed a gradual, safeguards-led pathway for the Employees' Provident Fund Organisation. According to the article, EPFO is considering allocating up to 3% of fresh annual accretions to Category I and II AIFs, with the proposal expected before its Central Board of Trustees in November. EPFO has not yet invested in such funds, and any move would require final trustee approval and detailed guidelines. Reported safeguards include a minimum AIF corpus of Rs 100 crore, caps on exposure to individual funds, restrictions on overseas-incorporated entities, and fund-manager independence requirements. Initial investments may be routed through the National Investment and Infrastructure Fund and SIDBI's Startup India Fund of Funds 2.0.
India's AIF industry has expanded rapidly, but remains heavily reliant on wealthy individuals and family offices. SEBI data show total AIF commitments rose to Rs 17.53 lakh crore as of June 2026, up nearly 24% year-on-year, while cumulative investments crossed Rs 7 lakh crore for the first time. SEBI's annual report recorded 1,829 registered AIFs as of March 2026, of which 1,019 were Category II funds.
Duggal said private credit is attracting increasing interest from domestic institutional investors, including insurers and family offices, particularly in performing and high-yield credit strategies. He cautioned, however, that Category II investments are illiquid and require long-term, patient capital, and that governance, valuation, liquidity and concentration risks must be carefully managed.
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